Budget 2019: India’s Current Account Deficit Within Manageable Levels, Says Economic Survey

Although the Current Account Deficit increased to 2.1 per cent of GDP in 2018-19, up from 1.8 per cent in 2017-18, it is within manageable levels, stated the Economic Survey.

New Delhi: India’s current account deficit is within manageable levels, the country’s Economic Survey 2018-19 said on Thursday.

The current account is the net difference between inflows and outflows of foreign currencies.

According to the survey, although the CAD increased to 2.1 per cent of GDP in 2018-19, up from 1.8 per cent in 2017-18, “it is within manageable levels”.

“The widening of the CAD has been driven by a deterioration in the trade deficit from 6 per cent of GDP in 2017-18 to 6.7 per cent in 2018-19,” said the survey, tabled in the Parliament by Finance and Corporate Affairs Minister Nirmala Sitharaman.

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“Rise in crude oil prices in 2018-19 led to the deterioration of trade deficit.”

However, acceleration in the growth of remittances prevented a larger deterioration of CAD.

As per the survey, in funding the CAD, the total liabilities-to-GDP ratio, inclusive of both debt and non-debt components, has declined from 43 per cent in 2015 to about 38 per cent at end of 2018.

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“Further the share of foreign direct investment has risen and that of net portfolio investment fallen in total liabilities, thereby reflecting a transition to more stable sources of funding CAD.”

In sum, although CAD to GDP ratio has increased in 2018-19, the external indebtedness continues to be on a declining path.